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Background History of Central Bank of Myanmar

1. The Union Bank of Burma was established on 3rd April 1948 by the Act of Union Bank of Burma 1947 and took over the functions of the Yangon branches of the Reserve Bank of India. It did not have the full power of a central bank. In 1st July 1952, the Union Bank of Burma Act was enacted. In accordance with this Act Burma Currency Board was abolished and the Union Bank of Burma Act, 1952, conferred on the Union Bank of Burma all the usual functions of a central bank. The Union Bank of Burma was opened at the corner of Merchant Road and Sule Pagoda Road and had a sole right of currency issue. It was transferred from the Burma Currency Board to the newly created Currency Department of the Union Bank of Burma with effect from 1st July, 1952.

2. The Union Bank of Burma was established with an authorized capital of 40 million Kyats and a paid-up capital of 10 million Kyats by the Government. The People’s Bank of the Union of Burma Act was enacted in 1967 and a monolithic bank known as the People’s Bank of the Union of Burma was established in 1969 with the initial paid-up capital of 200 million Kyats that was fully contributed by the State.

3. After Myanmar adopted the socialist economic system in 1962, all banks were nationalized. Under the People’s Bank of the Union of Burma Act 1967, a monolithic bank was formed. After reformed the administrative system in 1972, the Union Bank of Burma Law of 1975 was promulgated and the banking system was recognized. The name of the People’s Bank of Union Bank of Burma was changed to the Union of Burma Bank. Consequently, four banks, namely the Union of Burma Bank, Myanma Economic Bank, Myanma Foreign Trade Bank and Myanma Agriculture Bank had emerged. Accordance with the 1975 Bank Law, initial paid-up capital of the Union Bank of Burma was 200 million Kyats that was fully contributed by the State.

4. After 1988, Myanma economic system has been transformed from the planned economic system to market oriented system. To develop the financial system which is in line with the market oriented by the Government, and to promote the efficiency of financial activities, the Central Bank of Myanmar Law was enacted in 2nd July 1990. The Central Bank of Myanmar was established with the paid-up capital of 500 million Kyats and of which 200 million Kyats were fully paid-up by the State. According with the new government, was formed on March30, 2011, Central Bank of Myanmar have to become independently to laid down the policies. Central Bank of Myanmar needs to enact monetary policy independently to control the price stability in domestic market and to preserve the internal and external value of the Myanmar currency the kyat. According to the new law of Central Bank (Draft), Central Bank of Myanmar will set up with paid up capital of 300 Billion kyat and of which 100 billion kyat will fully paid up by state.

5. The aim of the Central Bank is to control the price stabilities in domestic market and to preserve the internal and external value of the Myanmar Currency, the kyat. In accordance with its aim, the Central Bank also endeavor to attain such objectives so as to promote efficient payments mechanisms, and the liquidity, solvency, and proper functioning of a soundly based financial system and to foster monetary, credit and financial conditions conductive to the orderly, balanced, and sustained economic development.

6. The main responsibilities of the Central Bank of Myanmar are;

(a)

to act as to role issuer of domestic currency and as a banker to the Government;

(b)

to act as an adviser to the Government in respect of economic matters;

(c)

to inspect and supervise the financial institutions;

(d)

to act as a banker for the financial institutions;

(e)

to manage the international reserves of the State and to perform the transactions resulting from the participation of the State in intergovernmental organization and to undertake all the responsibilities in the name of the Government in dealing with the aforesaid organizations on behalf of the Government.

7. On April 1, 1976, the Union of Burma Bank had 930 total staff strength, comprised of 85 officials and 845 staff. On April 9, 1981, the State Council allowed to expand the staff strength of the Central Bank’s staffs to 1333, comprised of 100 officials and 1233 staff. Due to the increase in banking activities, on 28, December, 1989, the State Law and Restoration Council permitted to expand the Central Bank of Myanmar organization structure which had 1656 staff strength, comprised of 151 officials and 1505 staff. The central bank activities were carried out by six departments namely Administration Department, Currency Department, Accounts Department, Internal Audit & Bank Supervision Department, Research & Training Department and Security Department.

8. On December 23, 1992, due to the necessity of foreign currency management, Ministry of Planning and Finance allow the Central Bank of Myanmar to establish the Foreign Exchange Management Department and took over the functions of foreign currency management from the Myanma Foreign Trade Bank.

9. On March 27, 1996, the Central Bank of Myanmar was moved to the No. 26, Settmu Road, Yankin Township, Yangon. With the approval of the Ministry of Finance and Revenue, the Central Bank of Myanmar established the Bank Regulation Department on 1st January 2001 so as to scrutinze and issue various instructions and directions for inspection to review bank compliance with AML/CFT requirements like other market-oriented economies.

10. Head office of the Central Bank of Myanmar was moved temporarily to Building No. 26 in Nay Pyi Taw on (26-1-2006) and expanded its organizational structure. It has one Head office in Nay Pyi Taw and one branch office each in Yangon and Mandalay. In this context, the Central Bank of Myanmar’s staff to increase 1522 of which 181 are officials and 1341 are staff. The Head office of the Central Bank of Myanmar was moved again to Building No. 55, in Nay Pyi Taw on 1st October, 2010. In accordance with this aim the organization body of Central bank of Myanmar needs to expand the staff strength. On 8 November 2012, the cabinet approved the CBM’s organization chart to expand the staff strength to 2525, comprised of 494 officials and 2031 staffs. The following 15 departments have carried out the Central Bank functions –

11. During the period of 1990 to year 2000, the Central Bank of Myanmar has issued for convenient holding of the currency, 10 Pyas, 25 Pyas, 50 Pyas, 1 Kyat, 5 Kyats, 10 Kyats coins and, 50 Kyats and 100 Kyats silver coins. It also issued the currency notes for 1 Kyat featuring a photo of General Aung San, and 50 pyas featuring a picture of harp. CBM also issued the series of King Lion currency notes in denomination of 1 Kyat, 5 Kyats, 10 Kyats, 20 Kyats, 50 Kyats, 100 Kyats, 200Kyats, 500 Kyats and 1000 Kyats. New note for 5000 kyats featuring a white Elephant bear international security standard was issued on 1st October, 2009. New bank notes for 10000 kyats featuring a Royal White Elephant bear international security war issued on 15th June 2012. The interest rate of Central Bank is 10% per annual and minimum rate is 8% and maximum rate is 13% per annual for lending of commercial bank respectively.

12. The Central Bank of Myanmar restored the old, damaged and default currency notes that are not appropriate to put into circulation in the country. Paper Mills were built in Palate on 24th March, 2002 and in Yangon Shwe Pyi Thar Industrial Zone on 25th December, 2003 for using those damaged papers as raw materials for producing paper products.

13. With the objective of the enhancing foreign exchange earnings and for the convenience of tourists visiting Myanmar, the Central Bank of Myanmar has issued Foreign Exchange Certificates 1unit, 5 unit, 10 unit since 4th, February 1993, and 20 unit in 1996. Anyone can hold FECs and can open the foreign exchange account with FECs at the State owned banks which are authorized to conduct foreign banking operation.

14. The Central Bank of Myanmar has issued of one tical, half tical and quarter tical gold coins since 1st January, 1991. It has also issued one tical, half tical and quarter tical gold coins since 21st September, 2005, and five tical, ten tical and twenty tical gold coins since 8th November, 2010, respectively, Gold coins have been sold by daily gold price rate in Myanmar Kyat.

15. The Central Bank of Myanmar has granted licenses to open domestic private banks since 1992. In 2004, there were 23 domestic private banks. As of November 30, 2010, the CBM has granted licenses to open 19 domestic private banks and these banks provide domestic commercial banking services.

16. The Central Bank of Myanmar has issued licenses to foreign banks to open their representative offices in Myanmar. There are 50 representative offices during 1993 to 2000. In 1992 after Asia financial crisis, the 38 foreign banks closed their representative offices. As of November, 2010, there are 13 representative offices of foreign banks in Myanmar which are four from Singapore, two each from Malaysia and Japan and one each from Bangladesh, Thailand, Cambodia, Brunei and Vietnam.

17. The Central Bank of Myanmar is continuously strengthening the supervisory the private banks in order to preserve the soundness of financial situation and analyze their activities to comply with the existing law, rules, regulations and instructions. Domestic private banks are required to submit their daily transactions and statements to the Central Bank of Myanmar and the CBM compiles and submits the banks’ daily financial statement, and weekly and monthly financial statements to the Ministry of Finance and Revenue.

18. The Central Bank of Myanmar has issued various instructions and circulars for inspection to review the bank compliance with the Control of Money Laundering Law which was enacted in 2002. The CBM issued the rules of Anti-money Laundering and Countering Financing of Terrorism (AML/CFT) including scrutinizing Customer Due Diligence (Know Your Customer), records keeping requirements and the requirements of reporting the cash movement transactions and wire transfer transactions exceeding threshold amount (USD Ten Thousand and above in Foreign Currency and/ or Kyat One Hundred Million and above for cash deposits/ withdraws) and unusual or suspicious transactions.

19. Myanmar has implemented the UN Security Council Resolution 1267 and 1373 relating to the prevention and suppression of the financing of the terrorist acts. The CBM has issued the instructions to the banks and financial institutions in order to prohibit transactions with suspected terrorists and terrorist organizations.

20. The Central Bank rate was 4 % through 1961 to 1989. When Myanmar introduced the market- oriented economy, the CBM is empowered to vary the interest rate in order to harmonize with the national economic condition since 1st September, 1989. To develop Capital Market and to give the public more opportunities to save, on behalf of the Government, the CBM has issued and sold 3-year and 5-year Government Treasury Bonds in denomination of Kyat 10,000 and Kyat 100,000 to the public since 1st December, 1993, in Yangon and January, 1994, in Mandalay. Furthermore, the CBM has been issuing 3-year Government Treasury Bond in denomination of Kyat 1,000,000 since 1st January, 1997. Moreover, the CBM has issued 2 years maturity and Kyat 10 million Government Treasury Bonds since 1st January, 2010. The interest rates of 2-year, 3-year and 5-year Government Treasury Bonds are 8.75 %, 9.0 % and 9.5 % per annum. As Myanmar has become a member of ASEAN (Association of south East Asian Nations) since July 23, 1997, it is committed to cooperate with other members in strengthening ASEAN’s unity, economic and political stability and to enhance cooperation in financial activities. Furthermore, the Central Bank of Myanmar has joined the ASEAN Central Bank Forum.

22. The Myanmar Banks Association (MBA) was established in accordance with the decision Sr. No. 4/99 of Trade Council on April 1, 1999 to support the policy guidelines laid down by the State for the development of agriculture, industrial and trade sectors; to co-operate and co-ordinate among banks, within the policy framework for further preservation of the internal and external value of the Myanmar kyats to take a leading role in the promotion of co-operation and cohesiveness among banks and for the interest of banks; and to have a nature of the public habit of relying on banks and using banking services. MBA holds the meetings monthly for discussing and adjust the banking issues.

23. The Central Bank of Myanmar and Myanma Foreign Trade Bank, Myanma Investment and Commercial Bank, Myanma Economic Bank which authorized to deal in foreign banking, with Foreign Banks have installed the Society for Worldwide Interbank Financial Telecommunication(SWIFT) system in order to transfer the foreign exchange accounts since March, 2004.

24. The Banking Network has implemented step by step approach among the Central Bank of Myanmar, State-owned banks and domestic private banks since January, 2008. The official letters and accounts related to banking transactions had been transmitted among the members of Banking Network by online system. The Central Bank of Myanmar monitors the financial stability of domestic banks, uses Electronic Fund Transfer for transaction accounts among banks and automatic clearing accounts through this Network. Moreover, the Certified Cheque System was introduced on January, 2008 for safety and efficient services for government settlement system.

25. The Capital Market Development Committee led by the Minister for the Ministry of Finance and Revenue was organized on July 1, 2008, Moreover, Six sub-committees were formed on August 19, 2008. These sub-committees are as follows:

(a)

Sub-committee for development of domestic securities market;

(b)

Sub-committee for establishment and encouragement of public companies;

(c)

Sub-committee for training, education and information concerning with the capital market, and

(d)

Sub-committee for accounting and auditing standards for Securities Market.

26. For the development of a capital market in Myanmar, a roadmap with timeframe has been started to implement accommodating to the timeframe. There are three phases in implementing capital market development in Myanmar. With a view to initiating the securities market, the Myanma Economic Bank has formed a joint venture security firm with Daiwa Institute of Research Ltd to form the Myanma Securities Exchange Center Company Ltd. The Securities Exchange Law (Draft) has been approved by National Parliament and is being now submitted to People Parliament.

27. The Central Bank of Myanmar has formulated and implemented the monetary policy which is in harmony with economic and production growth rates. At present, the Central Bank of Myanmar mainly uses such monetary policy instruments as reserves requirements, interest rate policy and limited open-market operation with a view to achieve financial sector stability which is consistent with transition market oriented economy.

28. According with the new administrative, the Republic of the Union of Myanmar, Exchange rate unification started on (1-4-2012) and abundant the pegged with SDR the managed floating Exchange Rate regime and adopted. Moreover the forex auction starts from April 2, 2012 for exchange rate stability.